Competition in Healthcare: المرض والموت
When it comes to healthcare, I am fond of saying that the only two true competitors we have to worry about in our industry are: Disease and Death.
The more money and people we have flowing into our healthcare system to fix this broken and bloated industry the better. However, here in the GCC, there is a risk that the ‘disease of false competition’ may lead to the death of the private healthcare industry.
The healthcare landscape across the Gulf Cooperation Council (GCC) continues to evolve with numerous regulatory changes by our respective Ministries of Health in recent years impacting the healthcare markets of the two largest private markets in the region, the Kingdom of Saudi Arabia and the United Arab Emirates, with further changes anticipated for the markets of Qatar, Bahrain, Kuwait and Oman. It is important for healthcare participants and other key healthcare stakeholders in the region (especially those in the private sector) to stay abreast of the changes, many of which could significantly impact the market.
Healthcare markets in the GCC have remained spirited despite uncertain economic headwinds and hyperbolic oil prices. As GCC markets continue to mature due to shifting regulatory requirements, mandatory lines of business are driving overall growth. The GCC region has seen significant growth across sectors in the last two decades, and the Healthcare sector is no exception to this trend. The growth in the Healthcare sector has been driven by burgeoning population (especially the senior citizen segment), increasing life expectancies and rising prevalence of lifestyle diseases with CAGR calculations ranging from the low to high teens.
Moreover, the GCC countries have made appreciable strides in their efforts to upgrade and equalize access to medical facilities. There are 26 mega hospital projects in the GCC that are in active stages of development (although many face delays) that are worth over 100 Mn USD. There are a further 154 planned public hospital projects as well. The majority of these projects were expected to be completed by 2020. The total investment cost of these projects is calculated as USD 23.5 Bn and are expected to add a total of 18,123 beds. The calculated average cost per bed is USD 1.30 Mn, which is significantly above the widely accepted international best practice benchmark of around USD 1 Mn per bed.
However, beautiful sea-view stone and steel buildings clad in shiny windows with fancy night time lights displays do not treat patients. Clinicians do.
Therefore, in order to staff these existing mega projects in the GCC, significant additional manpower resources are required to fulfill (and maintain) the quality of healthcare services. In this vein, the GCC will require at least 21,933 doctors, 48,908 nurses, 6,065 pharmacists and 26,736 allied health professionals who will in turns require at least 1.8 million hours of continuing medical education (CME) per year. This is only the clinical manpower shortage since these thousands of clinicians will also require at least 107,647 active hospital administration and management staff.
Earlier this week, His Excellency the Minister of Health in Saudi Arabia announced a plan to provide universal healthcare coverage to all Saudi citizens within five years followed by further changes to healthcare provision by establishing 20 medical complexes (or clusters) each serving a one million slice of the population. This seismic shift in Saudi healthcare is a positive step and reminds me of the same McKinsey playbook of separating the three pillars of the Abu Dhabi healthcare system back in 2007 into a separate regulator, provider and payor of healthcare.
It is, however, very important to maintain a Patient First or Patient-Focused Healthcare system. The debalkanization of any industry runs the risk of alienating and disenfranchising the primary benefactor of said industry — in our case the patient.
The good news for healthcare planners in the GCC is that the GCC healthcare provider subsector still trails international benchmarks even though it has been growing rapidly over the past few years. Supported by larger healthcare budgets, all GCC countries have embarked on ambitious healthcare infrastructure building programs. Such large medical cities and complexes, with billions of dollars of investments lined up, are expected to not only equip the region with much needed additional medical infrastructure but also raise the quality of healthcare services in the region. The table below includes the original projected completion year, from our analysis 11 hospital projects are significantly delayed, representing 44% of total mega projects in the GCC.
GCC Gap Analysis
Earlier this year, we did some research to calculate the gap analysis for all GCC health indicators (bed, physician, nurses, pharmacist and allied health professional) for current year (2018) and five years into the future (2022) based on three standard sets of indicators including:
- Based on current OECD Average — Aggressive Case
- Based on current GCC Maximum — Improved Case
- Based on current GCC Average — Base Case
These three standards can be thought of as different scenarios for a sensitivity analysis. The base case would be for the GCC to maintain its healthcare indicators according to the current GCC Average Scenario, this scenario will have a limited impact on most of the GCC countries as the ratios are fairly close to one another however the gap would be significantly improved. The same can be expected of the GCC Maximum Scenario as there is a limited difference between the leading GCC country and the average. However, due to the increasing disparity between the OECD and the GCC, the OECD Average Scenario is the most aggressive one and will require the most amount of financial and human resources to address the gap.
a) OECD Average — Aggressive Case Scenario
The gap value is derived by the difference between the health indicator ratio of the OECD average and the respective GCC country’s value. This value of difference is then multiplied by current population as well as the forecasted population in 2022. The future gap in 2022 also assumes that numbers of hospital projects under construction are completed within the next five years and are staffed accordingly. We also assume the average hospital size to be 200 beds to calculate the gap in the number of hospitals. In this scenario, the GCC will thus require a little under 1,000 new hospitals by 2022 at an estimated cost of 224 Bn USD in order to maintain the current OECD average. These hospitals will require over 57,000 physicians and 230,000 nurses to staff the 166,000 beds that need to be added in order to obtain the OECD average. According to a compilation of the current mega-projects, the 18,123 beds planned across the GCC will only meet 10.7% of the future beds that will be required by 2022 to reach the current OECD average.
b) GCC Maximum — Improved Case Scenario
The gap value is derived by the difference between the health indicator ratio of the maximum value of GCC’s countries and the respective GCC country’s value. This delta is then multiplied by current population as well as the forecasted population in 2020. Since Saudi Arabia has the highest value of health indicators among the GCC countries, it’s values were taken as a reference.
In this scenario, the GCC countries excluding Saudi Arabia will thus require around 93 new hospitals by 2022 at an estimated cost of 31.2 Bn USD in order to reach the current GCC Maximum level. These hospitals will require over 21,000 physicians and 36,000 nurses to staff the 18,308 beds that need to be added in order to reach the current GCC maximum level. According to a compilation of the current mega-projects, the 12,273 beds planned across UAE, Kuwait, Oman, Bahrain, and Qatar will meet 67.0% of the future beds that will be required by 2022 to maintain the current GCC Maximum level.
c) GCC Average — Base Case Scenario
The gap value is derived by the difference between the health indicator ratio of the GCC average and the respective GCC country’s value. This delta is then multiplied by the current population as well as the forecasted population to be in 2020. Negative numbers should be interpreted as an oversupply. In this scenario, most GCC countries will not require any new hospitals by 2022 with the exception of the UAE, Oman and Qatar. UAE and Oman are the only countries which would require an increased number of physicians and nurses. Saudi Arabia and Kuwait have surpassed the GCC average in all categories. UAE, Oman, and Qatar would require 33 hospitals at an estimated cost of 8 Bn USD to be able to meet the GCC base scenario. These hospitals would need over 6,000 physicians and 15,000 nurses for these countries to reach the current GCC base level.
An Emphasis on New Models of Care and Prevention to Fight the Two Ds
Spending within the GCC healthcare industry is expected to continue grow in the upcoming years as outlined above. However, as the old addage goes:
“a dirham spent on prevention is better than a dinar spent on treatment”
In the current scenario of increased prevalence in chronic diseases, the rise in lifestyle risk factors as well as a growth in the elderly demographic, there is an increased burden of demand on the healthcare sector in the GCC. While there still must be a considerable investment in the healthcare sector with regard to specialized centers of excellence or large cathedrals of care, there are many other avenues where the return on investment would be a bit more positive such as adopting newer styles of delivering health care, especially since traditional primary health care systems have not had a favorable outcome in providing cohesive care here in the GCC.
There have been a number of alternatives to the traditional PHC in more developed healthcare markets. Basic health services are being offered in a retail environment like pharmacies and supermarkets, with lower costs and reduced waiting times. Digital health is of particular significance in this field as telehealth services, online patient forums, and early detection devices paired with technology are able to provide a broader range of treatment, including preventive healthcare to a wider population.
The voiced alveolar stop in Digital Health might just be the phonetic panacea to combat those terrible D’s found in Disease and Death.